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Meet Merck

The giant drugmaker partnering with H. Lee Moffitt Cancer Center and Research Institute has come a long way since Vioxx.

By KRIS HUNDLEY, Times Staff Writer
Published February 18, 2007

Last year Merck & Co. Inc., the world's second-largest pharmaceutical company, had preliminary discussions with 5,000 potential partners, pursued due diligence on nearly 400 proposals and ultimately signed 35 deals. Only one of those was in Florida, with the H. Lee Moffitt Cancer Center and Research Institute in Tampa.

The deal, announced just before Christmas, has encountered some delays, as both county and state officials stall on approvals of up to $43-million in public incentives. But if approved, the arrangement would give Merck, of Whitehouse Station, N.J., exclusive access to a tumor-tissue database being developed by Moffitt in exchange for nearly $100-million in cash and technical support.

The partnership with the drug behemoth promises to catapult the Tampa research institute, which had nearly $54-million in revenues last year, to a leadership position in the development of personalized medicines for cancer.

Merck, which had 2006 sales of more than $22-billion, gets to cull through a treasure-trove of genetic and clinical information that could lead to the development of blockbuster cancer drugs.

News of Merck's partnership with Moffitt resonated across the Tampa Bay area when it was announced, with officials praising the deal publicly before proceeding to squabble over who contributes how much in private. Both Hillsborough County, which had pledged up to $28-million, and the state, which promised $15-million, have delayed final approval of their contributions. The city of Tampa has agreed to contribute $800,000 cash and land valued at $1.2-million. Moffitt officials say public funding is critical to making the arrangement possible.

At Merck, the deal was just one more illustration of the drugmaker's Cinderella-like transformation over the past two years.

John J. P. Kastelein, a cardiologist at the University of Amsterdam who has consulted for Merck, told Forbes magazine recently that he once found the company "nasty, arrogant ... hard to work with, cheap on the clinical trial side with a mediocre track record."

"That is definitely changing," Kastelein said. "Merck is busy with a revival."

In 2006, Merck had more new drugs and vaccines approved by the U.S. Food and Drug Administration than any of its rivals, adding five products that are expected to generate $2-billion in revenues this year. Enthusiastic investors drove the company's shares up more than 38 percent for the year, outpacing competitors' stock gains.

That's a far cry from two years ago. Then Merck was still reeling from its September 2004 decision to pull Vioxx off the market after the arthritis remedy was linked to increased incidence of heart attacks and strokes. Overnight, the company lost a product that generated annual sales of $2.5-billion. It also lost the public's trust and incited a flurry of patient lawsuits now numbering more than 27,000.

The Vioxx debacle came on the heels of three years of declining earnings. Merck's pipeline of new compounds was drying up as it faced a patent deadline in mid-2006 for Zocor, the cholesterol-lowering drug that accounted for 20 percent of sales. The company's stock, which had been $95 a share in 2000, plummeted to about $26 in the weeks after the Vioxx recall.

In May 2005, Merck replaced its chief executive with Richard T. Clark, a long-time employee who had run its manufacturing operations. The company announced a plan to cut 10,000 jobs, speed up the development of drugs and slash expenses.

Last year, Merck went a long way toward delivering on its promises. It pared 10 months off its drug-development time line. It launched five drugs while keeping marketing costs flat. It also cut $5-billion in expenses.

Obstacles remain. Fosamax, which accounts for 15 percent of sales, will lose patent protection in 2008. Cozaar, Merck's $3-billion hypertension drug, loses its patent in 2010.

And though Merck has won most of the handful of Vioxx cases that have gone to trial, the company's potential liability is a significant risk to shareholders, according to several analysts.

"While fears related to Merck's exposure to the Vioxx litigation have meaningfully subsided, the issue is still far from being resolved and still could be a source of volatility," wrote Roopesh Patel, an analyst with UBS Investment Research in New York City in December.

Merck's Clark, who made $6.2-million last year, said the company will fight every Vioxx complaint because "we did nothing wrong." During an analyst meeting in early January, Clark tried to sound humble as he reviewed the past year's accomplishments.

"When we laid out our plans in December 2005, the majority of analysts thought we were clueless or that we did not know how to execute," he said. "We still have a long way to go. But 2006 was the end of the beginning."

Times researcher Caryn Baird and Times wires contributed to this report.

Kris Hundley can be reached at hundley@sptimes.com or 727 892-2996.

[Last modified February 17, 2007, 18:34:45]